Thursday, January 29, 2015

Stock Purchase: BBL

On 01/29/2015, I bought 30 shares of BHP Billiton PLC (BBL) at $42.65.

This is my third purchase of this company stock.  The first purchase was made on 11/12/14 with 22 shares at $52.13, and the second one was made on 12/02/14 with 25 shares at $47.30. With the new addition, I was able to average down my average cost to $47.02.

I first heard about this company from Dividend Mantra.  His excellent detailed analysis in several articles convinced me that this company is a good candidate for DGI portfolio. 

First, let's see if BBL meet my stock purchase criteria.

 

From above criteria check list, BBL is very juicy with 5.27% dividend yield.  The payout ratio is also sound less than 50%.  10-year dividend growth rate (DGR) averaged at 22.17%.  Recent 5-year average DGR is slower at 8.9%.  I could expect that in the next two years the DGR rate would be flat.  But with 5.27% as the starting point, I have enough patience to wait for the long run higher DGR.

I didn't bother to check the price discount, because current market is panic and lowered 1-year targets (for example, S&P Capital IQ 1-year average is $36, while MSN money set the 1-year target at $25.09. )  This article analyzed very well about the industry risk (especially iron ore), and BBL's strength in this industry, even during the downturn.  I totally agree with the author that, "The fall of the iron ore price will come to an end sooner or later, and the current share price levels might already present attractive entry points to buy into this market. Since we might see further declines in the next months to come, I personally prefer to reduce the risk and to concentrate on the strongest players in the industry for the time being. One of these stocks is BBL, which offers an attractive and most likely sustainable dividend, which makes it easier to wait for the profits to come in."

Disclosure: Long BBL.

1 comment:

  1. I like this pick but have an inkling the bottom is not in for commodities. My thesis is Japan and the Eurozone are committed to racing each other to the bottom by printing currency. Lots of money is flowing into the US dollar thus causing the dollar to rise (and what a tear it has been on!) Almost every commodity on the planet is priced in dollars so the price of basically everything is in decline for a couple years until (if?) the Europeans and Japanese come to their senses.

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